In April 2011, the Financial Stability Board published its note on shadow banking. The FSB released the note following the commitment made by the G20 at the Seoul November Summit to look at shadow banking. It is broadly described as credit intermediation involving entities and activities outside the regular banking system. The note recognises the advantages of shadow banking, for instance the fact that it provides market participants and corporates with alternative source of funding and liquidity, but also a source of systemic risk.

The reports considered three main themes.

  • Clarifying what is meant by the shadow banking system,
  • Setting out potential approaches for monitoring the shadow banking system,
  • Exploring possible regulatory measures to address the systemic risk and regulatory arbitrage concerns posed by the shadow banking system.

The AMIC responded explaining it believed that a key step in the ‘shadow banking’ discussion was to clarify the type of activities understood under the term ‘shadow banking’. Moreover the AMIC wanted to ensure that recommendations of regulatory reforms take into account the current regulatory developments and its impact on the asset management industry; and avoid regulatory overlaps. The Council also recommended a global approach in the definition and identification of shadow banking issues.

The FSB approved the initial recommendations at its July Plenary meeting and submitted its final recommendation at the G20 Autumn meeting.

The European Commission published in April 2012 a Green Paper on shadow banking. The AMIC responded to the Green Paper on 15 June 2012, and shared its concerns regarding the definitions of the term ‘shadow banking’ and its potential effects on the asset management industry.

On 18 November 2012, the Financial Stability Board (FSB) published its three consultative documents regarding “Strengthening Oversight and Regulation of Shadow Banking”.  The AMIC responded to the consultation on 14 January 2013.

On 7 April 2014 the AMIC responded to the FSB/IOSCO consultation on the assessment methodologies for identifying non-bank non-insurer Global Systematically Important Financial Institutions (‘NBNI G-SIFIs’).

On 29 May 2015, AMIC’s Market Finance Working Group (formed in December 2014 to address industry concerns about regulatory focus on shadow banking) responded to a second FSB/IOSCO consultation on a methodology to identify NBNI G-SIFIs. AMIC welcomed the FSB/IOSCO’s willingness to refine its approach following the first consultation, but cautioned against including asset management companies as potentially systemically risky entities alongside investment funds.

On 21 September 2016, ICMA’s AMIC has submitted its response to the Financial Stability Board’s (FSB) consultation paper on proposed policy recommendations to address structural vulnerabilities for asset management activities.
AMIC welcomed the FSB’s focus on activities instead of designating individual companies as systemically risky. However, AMIC cautions against returning to the designation debate. AMIC also encourages the FSB to consider a wider group of market participants than simply asset managers when assessing risk and formulating policy recommendations. AMIC also notes that any effort to harmonise leverage calculation should not impact the existing methods to calculate fund leverage established through European legislation.

On 24 October 2016, ICMA's AMIC has submitted its response to the European Commission's consultation paper on whether the existing EU macro-prudential framework is functioning optimally. AMIC raised concern about expanding the mandate and powers of the European Systemic Risk Board (ESRB) to non-banking under the current governance framework of the ESRB. AMIC recommends much greater integration of securities markets supervisory expertise in the macro-prudential policy framework. AMIC also suggests that already reported data is better used to understand financial markets from a holistic perspective.

On 18 September 2017, AMIC responded to IOSCO’s consultations on (1) CIS Liquidity Risk Management Recommendations and (2) Report on Open-ended Fund Liquidity and Risk Management – Good Practices and Issues for Consideration.
AMIC broadly agrees with the suggested amendments to IOSCO’s 2013 liquidity risk management recommendations. However, AMIC suggests some amendments to the recommendations to bring them in line with current market practice. Furthermore, AMIC counsels caution on stress tests, which can be misleading particularly on a systemic level. AMIC also welcomes the report on best practices on fund liquidity risk management, which helpfully references AMIC’s joint report with EFAMA on liquidity risk management.
The responses can be found here:
(1) AMIC response to IOSCO Consultation on CIS Liquidity Risk Management Recommendations
(2) AMIC response to IOSCO Consultation Report on Open-ended Fund Liquidity and Risk Management – Good Practices and Issues for Consideration

On 1 February 2019 AMIC published a response to a consultation report by the International Organization of Securities Commissions (IOSCO) on leverage in investment funds. In its response, AMIC welcomes the focus by IOSCO on each fund level on the potentially risky activities of asset managers as compared to an approach at management company level. Furthermore, AMIC agrees with IOSCO’s proposed two-step approach to measuring risk associated with leverage. With regard to the first step, AMIC recommends that the gross notional exposure (GNE) figure is combined with the net notional exposure (NNE) figure to filter potentially risky funds. AMIC views the second step as a framework for a more detailed risk-based analysis of risk in each jurisdiction, recognising that leverage as a concept is not synonymous with risk.

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